PopTech host Moran Cerf interviews Deutsche Bank  whistle-blower Eric Ben-Artzi on a live feed from Israel onstage at the Camden Opera House. (Photo by C. Parrish)
PopTech host Moran Cerf interviews Deutsche Bank whistle-blower Eric Ben-Artzi on a live feed from Israel onstage at the Camden Opera House. (Photo by C. Parrish)
In August, Eric Ben-Artzi turned down the $8.25 million reward from the U.S. Securities and Exchange Commission for being a whistle-blower who helped uncover massive fraud at one of the biggest banks in the world. 

On a live video feed from Israel, Ben-Artzi told the Camden PopTech audience why.

Ben-Artzi was a risk manager for Deutsche Bank, based in New York, when he realized something looked wrong. This was before the banking collapse and housing crisis of 2008, before Lehman Brothers hit the skids, before men in power suits in back rooms were telling each other the banks were too big to fail.

Ben-Artzi initially thought it was a mistake. Once he spoke to those responsible for signing off on the financial reports, he realized it was fraud. 

At the time Deutsche Bank was one of the top 10 financial investment banks in the world and one of the oldest, too. The bank was founded in 1870, worked a little too closely with Hitler to spiff up stolen Jewish gold, but went on to help rebuild Germany. Deutsche Bank became established globally and expanded to have a powerful presence in London within the last two decades.

There was a general air of concern in the risk department at Deutsche Bank. Eventually Ben-Artzi collected enough information to know there was a massive cover-up. The bank had $32 billion in collateralized mortgage debt obligations —  what turned out to be shaky, shady, chopped and sliced debt, a Fun House mirror kind of debt that wasn’t what it appeared to be and helped inflate the housing bubble. When people started defaulting on mortgages that they couldn’t afford and that should never have been backed, Deutsche Bank started dodging.

Ben-Artzi knew only part of the game, but he did know that billions of dollars of loss were being concealed. Three whistle-blowers, including Ben-Artzi, eventually claimed Deutsche Bank had concealed a $12 billion loss on those collateralized debt obligations — an amount Ben-Artzi says would likely have toppled Deutsche Bank into insolvency before Lehman slammed head-first into bankruptcy.

The SEC later estimated only $1.5 billion in fraud when the bank settled in 2015.

One of the ways to think about what was happening at Deutsche Bank is to think of a car dealership with a lot full of used Kias, Ben-Artzi told the PopTech audience.

“You know, you could argue about the value of a used Kia. Is it worth a thousand dollars? Two thousand dollars? But you certainly can’t call a used Kia a brand new BMW, and Deutsche Bank was pretending it had a parking lot full of brand new BMW’s all worth $100,000,” he said. “In a nutshell, that was what was going on.”

He finally decided his only option was to become a whistle-blower. 

“It’s a very frightening moment, because you know your life is not going to be the same after,” said Ben-Artzi. “You feel those butterflies in your stomach.”

Ben-Artzi took his mobile phone, went downstairs from his office and out on Wall Street. He started pacing. Once he was on the hotline, he was told to take down a serial number that would define his case. 

“I had to go into one of those buildings and write it down on a piece of paper I borrowed from a doorman,” said Ben-Artzi.

He continued to work at Deutsche Bank. 

Whistle-blowers don’t very often get thanks. More often, they get the boot.

Eventually, Ben-Artzi was accused of trying to break the bank as the SEC started to investigate. As the investigation moved ahead, he remained a quiet whistle-blower. Then, he was fired just before the bonus was given, which was a signal to other companies that something was horribly wrong, though nobody knew exactly what or why. Life changed immediately. Ben-Artzi couldn’t get a job. He could  no longer afford the rent or the private school for his children. He became aware of potentially being hacked. He had meetings in person, rather than by phone. 

“I did look carefully when I crossed the street or looked behind me on the street to see if anyone was listening to my conversations,” he said. “But there was only so much I could do.”

Unable to find a job in the U.S., Ben-Artzi moved to Israel and found work there. A few years afterward, when he learned the SEC was going to close the investigation, Ben-Artzi got in touch with the Financial Times in London and blew the whistle publicly this time, to force the investigation back into the open. For several months, he worked with top investigative reporters who were also working with several other whistle-blowers. Together they brought up new evidence and the investigation resumed. It was concluded earlier this year.

Not long afterward, Ben-Artzi got a call that he was to be awarded $8.25 million as a result of helping solve the crime. 

He already knew he was probably going to refuse, but he didn’t know for sure until the call came.

“I would much have preferred Deutsche Bank calling up to say thank you for doing your job, thank you for exposing this fraud. Or at least the new management calling me up to rehire me or offer me an award,” said Ben-Artzi. “That didn’t happen.”

“The problem with the award that the SEC is giving is that fines are imposed on shareholders,” he said. 

In the case of accounting fraud, it is the shareholders that are the victims and the perpetrators are the managers.

“The management here got away with their bonuses and retired very well,” said Ben-Artzi. “Some of them are still in the banking industry and could potentially do more harm.”

Rob a house and it feels like crime. Welfare fraud? That feels like a crime, too. But when some of the wealthiest people in the world steal people blind through shady dealings that almost topple the global economy, they get the equivalent of a parking ticket, said Ben-Artzi. They changed the lives of millions of people who lost their opportunities for college, lost their retirements, lost their houses, couldn’t find a job after college, and are still underemployed. We are still working our way out of the results of decisions made by Wall Street executives a decade ago.

Meanwhile, the bank executives pay the fine and go whistling back into the Fun House for another round of smoke and mirrors.

That, or something very much like it, was what Ben-Artzi was thinking when he said no to $8.25 million.

If you really want to know what a hero looks like, it looks like a bad video connection between Camden, Maine, and Israel, with an everyday kind of guy in a button-down on the other end who has paid a big personal price and is still angry and hurt and keeps trying to do the right thing, partially out of pride but mostly for those of us back here swimming back out of the deep end with our mortgages and college debt and 401K’s.

“In other words, it is not just that I saw robbery,” he said. “I called the cops, and guess what? The cops are just robbers and now they are robbing from shareholders to throw me a few bucks out of the wallet and telling me, “We’re partners. Now, shut up.”

The bank stole shareholder money and then the SEC took more from the victims to pay the whistle-blower award, he said.

“And the worst part of it is that some of these Deutsche Bank executives are themselves former and future top SEC enforcement,” said Ben-Artzi.

“To me this is really egregious,” he said. “If I had taken the money, I wouldn’t be talking to you here because you would say justice is served, what do you want?”

“And I think justice was not served.”